Techno’s is not the only application to be filed against MRIL under IBC. A bank, too, had filed an application earlier. In 2019, Yes Bank had moved the NCLT against the company alleging a loan default of Rs500 crore but yet to be admitted. 

However, on 20 August MRIL challenged the NCLT’s order to start insolvency proceedings. The company filed an appeal in the National Company Law Appellate Tribunal (NCLAT) against the order of Delhi bench of the NCLT. The matter will come up for hearing on 25 August. “The route MRIL has taken to go against the NCLT will be rejected instantly upon hearing,” says Pankaj Singhania, founder Lakewater Advisors, an equity research firm in Kolkata.

Commenting on the recent development, well-known Calcutta High Court advocate Raghunath Ghose of R.N. Ghose & Associates, who is proficient in corporate matters says, “I think the best option for the company is to settle quickly with the lender before the insolvency proceeding starts. This will give the company some breathing space and then it can pursue on its huge debt for restructuring with banks outside insolvency.” It is assumed, majority of financial lenders agreed to arrive at a resolution plan. 

Lenders had also initiated a debt resolution process under the Reserve Bank of India (RBI) circulation dated 7 June, 2019. The company had mentioned in its notes to the results for the quarter ended March that the inter-creditor agreement (ICA) for arriving at and implementing the resolution plan has been confirmed and signed by certain lenders and was in the process of being approved by remaining lenders.  “The company has been selling this story of debt resolution for many years. The fact is that the situation gas gone beyond their control,” says a person in the industry watching the development closely.  

Earlier between 2019 and 2020, MRIL disposed off 17 estates for around Rs764 crore. But it was not enough to pare the huge debt. The Khaitans today hold merely 10 per cent of the company.  

BM Khaitan group company, MRIL, is India’s largest with about 31 estates in Assam and two in West Bengal. Across India, Africa and Vietnam, it produces around 73 million kg of tea with 73,000 employees. Its gardens are located on some of the biggest and best tea growing areas in the world. In India, it produce over 40 million kg, including bought leaf.  

Modern factories

MRIL produces high quality tea which commands a premium. It has a continuous process of modernisation and upgradation programme of factories. The factories are among the most modern in the business and with export markets in mind, conform to the strictest conditions set in the EU and American markets – no chemical pesticides, no stray germs, vacuum packing, no man handling the product etc. As a quality producer, the company held on even through the crisis period. The company follow all ethical practices and sustainable process in tea manufacturing. Gardens and its infrastructure created around it are ahead of the industry. 

The Khaitans are known to be a good employer. Under the leadership of Aditya Khaitan and his high-calibre team of professionals, the company expanded in a blistering pace in India and overseas in the last decade.

The debt of MRIL came to public notice when its erstwhile auditor Deloitte Haskins & Sells made adverse comments on the annual statements of both MRIL and McNally Bharat. Deloitte observed that liabilities of the tea company have exceeded current assets as on March 2019. The company had also failed to meet statutory liabilities and painted a dire picture by casting doubt on the company’s refinancing proposal, which it felt was not in the control of the company. Subsequently Deloitte had resigned as auditors from both companies. 

Also when the pressure of investors and shareholders intensified with deteriorating performance, mounting debts and alleged inter-company misappropriation of funds, prompted MRIL chairman Aditya Khaitan at the company’s AGM, to admit that it was a mistake. 

“The fall and admission of MRIL in NCLT is unfortunate and more so because the situation could have been avoided with some risk mitigation and corporate governance measures,” explains Singhania.  Rather than an acute business downturn or flaw in business model, the company has been brought to its knees due to sub-standard policies and practices of the promoters, he adds.

The financial result of the company has become insignificance. In quarter ended June 2021 consolidated results, MRIL has reported a loss of Rs67 crore on a turnover of Rs221 crore as against the loss of Rs94 crore on a turnover of Rs196 crore in the previous corresponding year. 

As uncertainty mounts, it will be interesting to see whether the Khaitans’ appeal against the admission can be reversed by the NCLAT. And if not, then can Khaitan persuade 90 per cent of creditors (banks) to allow withdrawal, even if Gupta does not agree? But obviously it would be best to get Gupta to agree too by offering him a generous settlement.